00:00Mark, we were just getting an update on all things to do with the Iran-US relationship.
00:04We see the oil price a little weaker.
00:06Where are we, do you think, in terms of the markets thinking about war in the Middle East,
00:10about developments in the Middle East, and the role that the oil price plays?
00:13Because it has been instrumental to the bond market story in recent months.
00:19But I wonder how prominent it's going to be from here.
00:25So, two different time spans to answer that question.
00:27I think in the short term, where are we in terms of pricing?
00:30I think the market has a lot of cynicism about the deal.
00:35And that means that peace is not fully priced, which means if it doesn't break down,
00:40it can continue to be an extended kind of small tailwind of support.
00:45So, I think that that's important to emphasize, that it's not fully priced,
00:49that we're going to have some kind of, you know, continue going towards peace,
00:52that the breakdown possibility is there.
00:54On a bigger picture thing, where do we stand on our oil?
00:56I think probably one of the biggest developments of 2026 is that oil has gone from being perceived
01:02as one of the most important macro assets inputs in the world
01:06to people realizing that it's a lot less important than maybe they thought.
01:10I think that that is a game changer for the kind of the macro guidebook.
01:15It is no longer as influential in pricing every asset around the world.
01:21And I think that's partially in terms of the electrification we're going,
01:24but also just the massive supply of fossil fuels that we do have around the world.
01:32What does that mean for the bond market?
01:34The bond market is really interesting right now.
01:36Yields are just going up.
01:37And despite the fact that oil is going down,
01:39is that part of that same narrative you're talking about?
01:43Yeah, it is.
01:44I mean, the fact is, is that we are seeing that kind of that breakaway between,
01:48you know, we've had this complete collapse in oil prices over the last couple of weeks.
01:51And yet bond yields have stayed sticky at high levels.
01:54And in fact, it started drifting higher again over the past week.
01:57And I think that is that disconnect that, hey, it's not all about oil prices.
02:01Yes, oil prices matter.
02:03But they're not the be all and end all.
02:05I do think that the backdrop for bonds remains difficult after that hawkish FOMC last week.
02:12And I think that given that oil prices have already come down a long way,
02:16there is more of an asymmetric risk of another spike up here.
02:20If there is a complete negotiation breakdown in the Middle East,
02:23then there is an oil prices going much lower.
02:25So I think, you know, that implies that even though the oil is not the only driver of bonds,
02:30it still matters at the margin.
02:31And therefore, if we do get into the spike in prices, that could see yields jump again as well.
02:37Mark, if we get Starmer out, do we get further upsides on UK yields,
02:41further downside pressure on gilts?
02:44I think the headline is probably yes, but I don't think it lasts.
02:47I think this has been the most telegraphed, you know, leadership change in the UK,
02:53probably since the last one in the UK.
02:55They always seem quite predictable at the time.
02:58So this isn't like, you know, this isn't going to be treated as a shock for the markets.
03:01We're all just like waiting to find out the timing now.
03:03It seems inevitable that we are going to get that change of leadership.
03:07So to me, I don't think we get much more downside in the short term.
03:10And I think the fact that, in fact, that the replacement of Starmer with Burnham
03:13seems to be progressing in that direction very seamlessly
03:17means that Andy Burnham doesn't have to go further to the left.
03:19And that should ultimately be a slight bit of relief to the market.
03:21But yes, they'll trade this as a long-term negative,
03:24the long-term leadership turmoil in the UK.
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